If you are searching for an investment that provides you with a steady stream of passive income, you’re in luck.
REITs are structured to pay out a consistent distribution and Singapore has a wide range of options to choose from.
Of course, you should not just settle for any REIT.
It’s important to find one with attributes that allow it to not just sustain its distribution, but also to grow it over time.
The properties within the REIT should also be resilient to economic downturns.
A third factor to look at is the REIT’s distribution yield.
A 4% to 5% yield is sufficient to let you stay ahead of inflation.
Here are three REITs with dividend yields that exceed 4.5%.
United Hampshire US REIT (SGX: ODBU)
United Hampshire US REIT, or UHREIT, owns a diversified portfolio of grocery & necessities-based properties and self-storage properties.
As of 30 September 2021, UHREIT owns 18 grocery properties and four self-storage properties with a total property value of US$584.9 million.
Occupancy remained healthy at 95.5% and the REIT’s properties remained resilient as they are anchored by big retail names such as Walmart (NYSE: WMT) and Home Depot (NYSE: HD).
For its fiscal 2021 first half, UHREIT paid out a distribution per unit (DPU) of US$0.0305.
Based on an annualised DPU of US$0.061, its units sport a forward dividend yield of around 9.2%.
Meanwhile, UHREIT just concluded its maiden acquisition of two grocery-anchored properties in October for US$78.25 million.
Both properties are freehold and are located in Philadelphia, Pennsylvania and Richmond, Virginia.
As a result of the acquisitions, the pro-forma DPU for the fiscal year 2020 is expected to rise by 1.75% to US$0.0489 while the REIT’s portfolio value will rise by 13.3% to US$665.4 million.
UHREIT’s anchor tenants’ sales have remained healthy on a year on year basis, demonstrating the resilient nature of necessity-based properties.
With US 2021 GDP forecast to hit 5.9%, retail sales are expected to grow by 10.5% to 13.5% for the year.
These numbers bode well for UHREIT and will allow it to sustain its distributions moving forward.
Frasers Logistics & Commercial Trust (SGX: BUOU)
Frasers Logistics & Commercial Trust, or FLCT, owns a portfolio of 103 industrial and commercial properties worth around S$7.3 billion as of 30 September 2021.
Its portfolio is spread out over Australia, Germany, Singapore, the UK and the Netherlands.
For its fiscal 2021 ended 30 September 2021 (FY2021), FLCT reported a 41.4% year on year jump in revenue to S$469.3 million.
Adjusted net property income (NPI) rose 37.5% year on year to S$355.2 million, while DPU increased by 7.9% year on year to S$0.0768.
At the REIT’s last unit price of S$1.48, the trailing distribution yield stands at 5.2%.
FLCT’s occupancy stood high at 96.2% with limited near-term expiries in the fiscal year 2022 (FY2022).
The REIT’s aggregate leverage, at 33.7%, was well below the central bank’s threshold of 50% and the cost of borrowing was just 1.6%.
The interest coverage ratio remained healthy at 7.3 times, and FLCT had a debt headroom of nearly S$2.5 billion to tap on for more acquisitions.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, had total assets under management (AUM) of S$8.5 billion as of 30 September 2021.
The REIT’s portfolio comprised 86 properties in Singapore and 57 in the US whichincludes 13 data centres held through a joint venture with its sponsor, Mapletree Investments Pte Ltd.
For context, MIT’s portfolio has more than quadrupled since August 2010, showcasing the consistent growth in its AUM over the years.
For its fiscal 2022 first half (1H2022), MIT reported a 40.1% year on year surge in gross revenue due to the consolidation of its 14 data centres acquired.
NPI improved by 40.4% year on year to S$225 million and DPU climbed by 14.2% year on year to S$0.0682.
At the unit price of S$2.64, MIT is offering a forward annualised distribution yield of around 5.2%.
MIT’s gearing stood at 39.6% as of 30 September 2021 while the cost of debt remained low at 2.4%.
Get Smart: Identifying the right attributes
A dividend yield of 4.5% and above is enticing but that is not the only factor we should seek.
After all, what we want, as investors, is to buy REITs that can consistently pay us a reliable stream of income that we can tap on for our financial needs whether it is retirement or simply to pay for our daily expenses.
Creating a portfolio out of multiple REITs can reduce our reliance on a handful of REITs.
And that’s what we did at The Smart Dividend Portfolio, we have picked nine REITs that possess the characteristics that we think will make them long-term winners.
Growth is another important component.
For our select group of REITs, we believe that they have also been able to grow their asset base over time through a mix of organic growth and acquisitions.
And when that happens, that will bring in more dividends for us.
If you like what you read, try building your own REIT dividend portfolio.
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Disclaimer: Royston Yang owns units of Frasers Logistics & Commercial Trust and Mapletree Industrial Trust.